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Oct 24

Detroit’s innovative spirit

For an urban affairs journalist, John Gallagher has one the most interesting beats anywhere: Detroit. During his 30-plus years with the Detroit Free Press, he’s covered the city’s long slide of disinvestment, depopulation, and its 2013 municipal bankruptcy. He’s also covered Detroit’s remarkable turnaround and recent emergence as a hub of civic innovation.

With the CityLab summit coming to Detroit next week, Bloomberg Cities caught up with Gallagher to get his read on what’s going right in Detroit and why — and where he thinks the city still has room to grow.

Bloomberg Cities: In a recent column, you wrote: “I can’t think of a better site for a CityLab conference than Detroit.” Why?

John Gallagher: It’s hard to date the beginning of Detroit’s recovery, but somewhere around the middle of the first decade of this century, you begin to see the city doing a lot of innovative things.

Most notably, of course, they filed for municipal bankruptcy, which no other big city had ever done. That wiped out $8 billion in debt that was on the city’s books and freed up money for the city to do all kinds of things it hoped to do but couldn’t afford. We’ll come back to that.

One innovation was Motor City Match. That’s a program where the city takes its federal block grant money and plays matchmaker between entrepreneurs who need a place to do business and landlords who have vacant storefronts in the city’s old neighborhood commercial corridors. It puts them together and gives them each money — for the landlord to fix up the building and the entrepreneur to buy equipment, or whatever they need. They’ve managed to start 65 to 70 new business in the city’s neighborhoods, and there’s a similar number in the planning stages.

Then there’s Project Green Light, which is a crime fighting project where they place a bunch of cameras at gas stations and other businesses that have had trouble with carjackings or robberies. And apparently it’s really done a lot to crack down on crime.

Another one goes back to before the bankruptcy, when the city was so broke it couldn’t do anything. They began to create a lot of nonprofit conservancies, public authorities, and nonprofit corporations to take over chunks of the municipal operation.

So for example, Eastern Market, the city’s public farmer’s market — it was losing money and half the market stalls were empty. They created a nonprofit Eastern Market Corporation, with a board and professional management, and got some foundation money for it, and it completely turned around the operation. Now, Eastern Market is one of the best public markets in the country. On any given Saturday, you can find 40,000 to 50,000 people shopping there.

They did a similar thing with the convention center. And the RiverWalk, the great waterfront promenade, which is now about half-finished, was done through one of these conservancies instead of through the city’s Recreation Department, which wasn’t equipped to do something that complicated.

What’s the lesson of these partnerships?

When the city is unable to deliver something, there are other creative ways to do it. And in a way, it doesn’t matter who runs the city park as long as it gets done and it’s done right. There’s a lot of creative ways to do what you want to do. You need a partnership with the city, with foundations, corporations, and neighborhood groups. They all have to participate.

One lesson from Detroit’s situation is that there is a lot of money in this community — even though we think of it as a poor city, there’s still a lot of legacy wealth tied up in foundations. The auto companies have done well in recent years, and Dan Gilbert from Quicken Loans has done a tremendous job.

Let’s come back to Gilbert and the foundations in a minute. You talked about bankruptcy as an innovation. Is it?

It was in the sense that it wiped out $8 billion in debt that was on the city’s books. Since the city got out of bankruptcy, it’s had enough money to do things. So the Planning Department, which used to be almost nonexistent, is now staffed up pretty dramatically.

In addition, they now have a grants office, which they didn’t have before, and they look for federal grants and philanthropic grants that are available for what the city wants to do. They also make sure the city is spending the money it gets. Detroit used to be notorious for giving back money it got from the feds but couldn’t spend because it didn’t have the staff resources to process everything in time. This new office makes sure we spend it — and spend it wisely.

“Now, Eastern Market is one of the best public markets in the country.”

At the tail end of the bankruptcy, [Mayor] Mike Duggan got elected, and he benefited from all this cash that was available. So he could start the grants office, staff up his Planning Department, and put money into things like Project Green Light. He hired a lot of interesting people from around the country to come in, and got a lot of publicity for that. Then some of these operations like Eastern Market and the convention center started to come alive, and the economy started picking up. So a lot of things began to gel at the end of the bankruptcy.

How is Detroit’s economy changing?

When the Great Recession came on, it became clear that the auto industry had reached its nadir. General Motors and Chrysler filed for bankruptcy. We had been talking for many years about how Michigan should diversify its economy. But it was only around that 2005 to 2010 era that it became obvious that the old way was broken completely.

The University of Michigan and other universities began to staff up tech transfer offices at that time, to help turn ideas into businesses. TechTown, the startup incubator affiliated with Wayne State University, began to flourish as an innovation center for the city. People began to take entrepreneurship seriously. Instead of thinking this was something that happened only in the Silicon Valley, we began to think maybe it could happen here, too.

I used to get a lot of calls from people, coming in from overseas or around the country: “I’m coming to look at the ruins of Detroit — can you show me around?” At some point, it became: “Show me the urban farms.” “Show me the new stuff.” Detroit’s reputation went from Rust Belt failure almost overnight to civic innovation capital. People come here from all over the world to see the innovation.

In 2010, his mortgage company, Quicken Loans, came downtown with 1,500 people. And now he’s got almost 20,000 employees downtown. And he takes a very aggressive attitude that he’s not just going to have an office building downtown, but he’s going to enliven the downtown with parks or creating this new streetcar line — it’s called the Q Line, after Quicken Loans.

There’s an awful lot that happened downtown, and Gilbert is responsible for much of it. He bought, or controlled through leases, about 100 properties downtown, including most of the old skyscrapers, and filled them up with his own people. And now we have lots and lots of other corporations that had been in the suburbs for decades moving back downtown.

What’s been the role of philanthropy in Detroit’s revival, and how is it changing?

There some interesting history with the Ford Foundation, which was started here by the Ford family and then moved to New York. They came up with the New Economy Initiative — it was a combination of about 10 other foundations, including Ford, Kresge, Kellogg Community Foundation, and several others. They put around $100 million into reinventing the Detroit-area economy. That evolved into funding the entrepreneurship ecosystem.

Most dramatically, the foundations helped create what came to be known as the “Grand Bargain” during the bankruptcy. Collectively, the foundations put in over $300 million. It was the biggest grants any of them had ever made and the fastest they agreed to do it. That was then matched by a similar amount by state legislature, and then some of the auto companies and people like Gilbert put money into it. It became this pot of money that got put into the bankruptcy in order to protect municipal pensions, and to save the artwork at the city-owned Detroit Institute of Art from being sold.

Since then, the foundations have said that they’re not going to just sit back and wait for people to apply for grants in Detroit, they’re going to be out looking for what they should be doing. So they’re tackling workforce development and physical redevelopment of the city. The Ralph C. Wilson Jr. Foundation just donated $100 million to finish a large chunk of the RiverWalk and do other major trails. The foundations have become much more active players, and I can’t imagine Detroit being as far along as it is if not for philanthropy.

You also wrote that Detroit’s failures should also be on display at CityLab, if only to spark ideas for solutions. What are Detroit’s biggest challenges?

We still have high poverty rates, among the highest in the country. Our school system is still not performing as it should: Reading and math scores are pretty bad. And getting economic development into the neighborhoods is a big challenge.

As interesting and amazing as entrepreneurship is, it is not the answer to mass poverty and mass unemployment. We have a lot of challenges with getting people the skills they need to get into the workforce.

And while there’s been a lot of focus on creating better regional relations between Detroit and the suburbs, regionalism is still an issue. Some cities are better at cross-regional cooperation — Minneapolis or Toronto, for example. But Detroit still struggles.

I see the current trends continuing. We’re clearly going to see more people living and working downtown. A lot of the projects now underway will be finished in the next three to five years, adding lots of new housing, more office space, and some new tall buildings. All that will continue. The RiverWalk will be built out. A lot of the economic development measures we’ve taken are going to bear fruit as people get used to using them. And the city’s Land Bank, which is only 5 years old now but has done a lot of good stuff in the neighborhoods, will figure out what to do with the vacant land.

The challenge for us is that the underlying problems of vacancy and abandonment and poverty and joblessness, those are still pretty severe. We’ve made a lot of inroads. But if revitalizing Detroit is a 25-year process, we are probably about five to eight years into it. Most of the work is still ahead of us. But we’ve certainly turned the corner in a big way.